2020 VISION & BEYOND - Westbrook International

DR AF T: VERSION 3

Westbrook International Ltd.Address: Linen Hall, 164-168 Regent Street, London

P: 0044 20 7096 2480

www.westbrook.co.uk

Future Data & Information Challenges in the Social Housing Sector Author: Chris Lyons, Chairman of Ashley House plc

2020 VISION & BEYOND

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How many times in the last 10 years have we heard the cry that the Registered Provider (RP) sector, including Housing Associations (HA) at large is gearing up for transformation? Today’s change agenda is being driven partly by a new political, regulatory and economic context and partly by the realms of the possible in terms of new business demands and digital opportunities.

The Social Housing Regulator estimates that private registered providers manage around 2.8 million homes, with a turnover of around £20 billion and annual surpluses north of £2 billion. It further observes that RP’s risk management must be appropriate to the scale, importance and long term nature of their business. RP boards have therefore been warned! The future is littered with risk and the Board of an RP stands responsible for ensuring the proper management of that risk.

The economic reality for many Association’s Boards means that they will have to set a new path, and developing a radical business model for their organisations in order to realise their commitment to providing affordable housing and investing in communities. In doing so the question remains have they invested sufficient in their infrastructure to make this a reality? If not, the future risks may be significant.

In developing a 2020 vision sustainable for the future Housing Associations must focus on these challenges. They may and likely have to operate in a very different forum to the established norm. the way they operate today. The recent implementation of GDPR was a watershed for organisations to gain understanding of the unfolding multidimensional complexities facing the sector which is often dubbed the “First Social Service”. What is clear is that the data challenge driven by multiple strategic issues and, in part, fuelled by the digital agenda looms large and is here to stay. We at Westbrook International along with our key partner Salesforce have been monitoring developments closely.

INTRODUCTION

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The purpose of this paper is to set out a number of those issues and drivers, promote debate and offer a number of insights and solutions to board members, executives and information specialists working within the Sector.

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Future Data & Information Challenges in the Social Housing Sector

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As if the housing crisis is not enough, the growth agenda, the trend towards consolidation, larger organisations with differentiated offerings; new products and ways of delivering services to a more diverse customer base; coupled with greater financial capacity , the value for money agenda all against the backdrop of increased tenant focus together with regulatory intervention will all play a significant part in the challenge ahead.

Although the sector has recently thrived financially, underneath the sector’s improved financial performance there remains a number of risks and variables that need to be managed carefully. The window of opportunity to be proactive in addressing and investing in change will not stay open long, as the Ggovernment’s policy changes around tenant focus, welfare reform, rent levels and Right to Buy begin to bite.

The outlook for the sector is positive. Recent Government financial pledges coincide with periods of financial strengthening. With the whole sector rising to a position of greater financial strength, it is expected that more enlightened providers will focus on improving IT based management systems to drive digital innovation. Fine words are written in annual reports but the sector is not noted for being ahead in the innovation stakes.

Will we really see digital housing management systems, the end of silo information systems, the growth in the use of data to offer personalised services, adaptive building systems for quicker design and construction, integrated information and data being nurtured and used as a powereful asset of the business?

Part 1THE STRATEGIC CHALLENGE AHEAD

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At the other end of the spectrum how will the drive towards innovative customer service models in light of the explosion of hand held devices, Facebook, Twitter and the raft of other burgeoning social media? The need to know the customer will take centre stage as organisations wake up to this; somethingexperienced by the water and energy companies too late. Customers may not be tied to them and they will need to invest in better services to tenants in order to keep them satisfied.

Now, creeping over the horizon are a whole series of emerging technologies including artificial intelligence, machine learning, analytics, cybersecurity, mobile working, biometrics, cloud, wireless, WiFi, 5G, VOIP, imaging, energy storage, holography. They each have the capability of changing industries and sectors. The complexity facing the sector by outside forces is immense, especially against a backdrop of historically low productivity and variable attempts at value for money.

The business impact will be a challenge without question. These technologies will impact on trends in current thinking: societies and communities, across generations, the world of work, risk management , business models, corporate cultures, ventures, collaboration, competitiveness - and may spurn what is already being called a fourth industrial revolution – a revolution driven by data and information.

The change required will go far beyond rearranging the few deck chairs left on the ship. Housing Associations, both individually and as part of the wider sector, need to reflect on their vision and purpose, and as a result review how successfully they are delivering for their customers. As such Bboards will need to focus on a repositioning of their business models in light of the data and consequent information explosion.

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In 2015 PWC’s assessment of the sector was notable in its foresight and is relied upon by many lenders and others in their deliberations. They noted that the year 2010 proved to be a defining moment in the history of the social housing sector marking, as was inevitable, the end of substantive grants to invest in social housing. With many associations celebrating the 50th anniversaries since their foundation it was natural point to reflect, celebrate and look forward to the next 50 years.

The changes to the grant funding regime only confirmed that the medium term future for these organisations lay in becoming more independent and self-sufficient. For other organisations whose origins lie in stock transfer, the root of the challenge is different – the impact of austerity in local communities, the increasingly complex nature of many customers’ needs, and the reconfiguration of how those needs are met - but the challenge itself is the same. PWC correctly argued then, and it is as important today, that the Housing Association of 2020’s must ensure that they stay relevant to its customers, communities and wider stakeholders.

The following six areas represent a clear programme of action that all can undertake, if they have not done so already. It is the author’s view that clarity of purpose is key - with a clear and compelling corporate strategy, derived from a robust and structured strategic assessment which makes sense to customers, employees and partners.

Housing Associations need to harness the potential of data, digital leadership and innovation to deliver their strategy. They should begin to treat data and information as an asset to be properly maintained, rather than stockpiled. Data should be used to generate an appropriate return befitting its cost of acquisition, manipulation and storage . Structural change – consolidation, acquisition, divestment and shared services – may be a feature along the way, but continuing to deliver the sector’s potential lies in a strong vision delivered with understanding and purpose.

Part 1

A BUSINESS MODEL FOR 2020 AND BEYOND

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F IGURE 1:

The reader will appreciate that this is a multidimensional issue, requiring structure and focus to enable delivery. In effect the issue can be viewed through a 6D prism (fig 1) which highlights this multidimensional complexity and at it’s heart are the twin drivers of data growth and digital enhancement.

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1. DIRECTION AND DESTINY

Clarity of purpose underpinned by a strong strategic planning capability is key. Setting a strategy is a dynamic process particularly in these times of risk and uncertainty. Housing Associations need to continually focus on establishing clarity on their vision, purpose and their core objectives.

Refreshing or developing a new corporate strategy, based upon proper strategic analysis, a structured approach to strategic choice and a focus upon strategic implementation including organisational design and culture is a prerequisite. Any future strategy, built upon engagement and consultation with the right stakeholders has the power to bring coherence to an organisation and provide a framework that forms the basis on which to make sound decisions now and into the future.

Whilst planning is always an imperfect science, to do so in the absence of quantifiable data and information sets merely exacerbates the underlying risk. The importance of data in plotting a future course in uncertain times cannot be underestimated.

2. DEVELOPMENT AND DIVERSIFICATION: HOW TO GROW SUSTAINABLY

Changes in demand for social housing and the growing diversity in customer segments mean that effective Housing Associations will need to continue to improve their understanding of customer needs in terms of services and assets, providing choice through diversification and commercialisation of services and developing new products. The historical focus on property and tenancy arrangements will in the future need to be matched an an equal focus on the tenant and their needs.

The quest for new services will always be data hungry something Housing Associations are not short of, but is the derived information of sufficient quality to merit a number of long term investment decisions particularly where property investment is involved.

With organisational mergers already prevalent and expected to increase, businesses coming together need to have a well-developed integration plan which delivers rapidly from the outset.The assumed value creation to justify the merger , will need to be assessed, monitored and reported upon requiring robust data and information sources.

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3. DESIGNED TO DELIVER: THE CASE FOR MODERN & EFFICIENT SERVICES

If Housing Associations want truly modern and efficient services they have to take a more holistic view of their organisations, consciously identifying the outcomes they want to achieve and designing services capable of delivering these as a whole.

By underpinning intelligent service design with powerful technology in the front and back office, Aassociations can release operational business costs while also providing the platform for consistent customer-focussed service delivery.

The days of stereotyped desk top based front ends may soon be numbered, as a wealth of data and information, often iniated by the tenant via digital devices and social media routes, start to flood organisations. The need for effective data and information capture, storage and subsequent usage to monitor, report and enhance performance will be key as Regulators take greater interest in value for money metrics.

4. THE POWER OF DATA

Arguably, at the heart of the issue, to be effective, Housing Associations need to become adept at aligning resources and operations with their strategic objectives. The key to unlocking the potential power of this kind is twofold.

First, it requires a change of attitude and mindset towards data creating a positive environment in which the value of that information it is treated like any other business asset. Second, it needs to have an infrastructure which easily links smarter delivery frameworks with the right data, information and insight.

Housing Associations need to strengthen their capacity and capability in terms of data collection, management, and analytics to produce the quality insight and intelligence needed to underpin new ways of delivering.

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5. EMBRACING DIGITAL CAPABILITIES:ENGAGING CUSTOMERS, EMBEDDING EFFICIENCY

Digital technology and culture is evolving rapidly. It is on everyone’s agenda driven by customer demand. It is having a significant impact on the way in which Housing Associations provide services and engage with tenants. Housing Associations need to use digital technology as a tool to drive innovation in their understanding of their customers and assets, how the two interact with each other, and how customer engagement and experience can be enhanced.

However, it comes with a price. The sheer exponential growth in data and information associated with the digital agenda needs to be properly scoped, planned and delivered. Thought of positively, the customer is providing huge volumes of information never seen before providing a real insight into behaviour, needs and requirements which, historically, were difficult to establish.

The challenge will be to create the ability to relate information through this invaluable source to existing data sets and produce meaningful management information to continually drive the future agenda.

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6. DYNAMISM ALIGNING LEADERSHIP, CULTURE AND COMPETENCIES

Ultimately, the successful delivery of any strategy depends on people. Housing Associations actively need to define their culture, building on their current strengths to establish effective behaviours and new ways of working that will help them achieve their ambitions, particularly through times of change.

It is argued that the explosion in data and information will force this change in ways as yet unimaginable. Housing Associations will need to identify the new competencies they need to develop in order to be sustainable in future, strengthening their digital and data capabilities in particular. Central to the success will be the establishment of a new breed at board level which includes data leadership champions and collaborative individuals who understand the power of data driven decision making and are not averse to partnership approaches to liberate the potential rewards.

As Boards conduct suitability assessments on various future options, their selection of an appropriate choice will be enhanced by a range of tools and techniques such as simulation modelling driven by enhanced data and information sources.

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Every industry is experiencing a ‘mobile device revolution’. It’s an unavoidable shift toward user-focused mobile services and solutions, radically reshaping virtually every aspect of modern life. Innovations in user-experience design have made the transition into new digital landscapes accessible and adaptable, even for users who may not see themselves as particularly ‘tech-savvy’.

Emerging digital solutions are re-inventing antiquated manual and keyboard processes for improved ease and efficiency. For instance, mobile ride-sharing apps and online food delivery platforms have streamlined service-based operations for optimal convenience, providing automated real-time updates and removing manual burdens, cash transactions and paper menus. Advances in mobile technology have simplified otherwise time-consuming processes to the tap of a screen.

The conveniences afforded by mobile technology results in gaps in resources and efficiency in housing organisations which potentially may be solved using mobile-first services. The consistent pressure is to provide excellent service to a growing population whilst working with limited funding. Managing documentation and inefficient workflows particularly drain critical resources; the emphasis has changed. Historically the focus has always been on the property asset and the tenancy arrangement. In future the focus will, shift to the tenant as a consumer, driven by the twin forces of regulation and technological change.

Part 1

THE UNSTOPPABLE SHIFT TOWARDS MOBILE DEVICE TECHNOLOGY

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What is certain is that legacy manual paper-based systems prove to be cumbersome and time-consuming when measured against a steady increase in volumes of tenant data. The traditional and, dare I say, antiquated approaches are not unlikely to be sufficient in meeting appropriate turnaround times or easing administrative burdens. With worklists and backlogs building up, front line staff’s valuable time and resources are being exhausted by data entry tasks, leaving less time for face-to-face tenant engagement.

Balancing efficient data entry, whilst maintaining personalised staff - tenant interactions has become increasingly difficult. Sitting behind a desktop screen, staff focus on the templates instead of the tenant. After hundreds of clicks and little eye contact, encounters end with both parties potentially feeling dissatisfied.

This white paper highlights potential points of tension between end-users and digitisation that Housing Associations must confront when attempting to streamline tenant and property documentation processes, using technology services in pursuit of accessible solutions for long-term sustainability in stimulating digital maturity.

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Housing Associations face challenges in deploying technology solutions that are not dissimilar to those encountered in other industries. Large third-party technology vendors propose digitising as a means to an end but frequently overlook the needs of the end-user in the creation and deployment of their solutions.

The modern age of mobile technology has heightened expectations for user satisfaction and unlocked new spaces for user-generated feedback; including tenant to tenant exchanges and in turn, digital innovators must prioritise the end-user experience in designing effective solutions. User dissatisfaction is of particular concern for the RPs in the context of digitally enhancing workflows across varying environments, as their mandate undoubtedly broadens to serve the community.

Presently, some technology is cumbersome to use and unreliable at critical moments of need and often deployed to serve silo based systems. Clunky processes that tie staff to their desks have monopolised working hours that could be dedicated to more effective personalised interaction with tenants.

Key considerations when establishing a mobile vision must require third-party vendors to work alongside housing specialist teams in co-creating bespoke workflows that operate to benefit, not inhibit, staff productivity and service delivery and promote sustainability and maximise organisational success.

Part 1

DIGITAL INNOVATION IN THE ECOSYSTEM OF TENANT ENGAGEMENT

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Digital Transformation;

Reality or Myth?

The historical development of Housing Associations has been predicated on growth underpinned by fiscal, grant and assured revenue support by Government.

Like all sectors, individual components are faced with the realities of planning for an uncertain future.

Consolidation in the sector has been the norm for a number of years. Forced consolidation by the regulator of groups of associations into single entities was, in the view of the author, both untimely, costly and a strategic error, unless there was clear evidence of potential financial distress where it is a necessity.

Against this backdrop, there is also a strong argument to say that, despite all the promotional, positioning and public statements to the contrary,

Associations know very little about the individual tenant, their circumstances, wants or collective needs.

Glossy annual reports championing the cause of a digital revolution are to be welcomed, but it remains to be seen just how RPs change the inherent historical focus on the asset, the tenancy and the revenue stream to a focus on the tenant and the community.

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Digital transformation is now forcing companies to change their business models and adapt to a new market reality. What’s interesting about this is that it’s not the companies that are driving this change. Instead, this change is being driven by the customer and their access to technology.

Today consumers expect relevant content in relation to what they’re doing anytime, anywhere, and in the format and on the device of their choosing. “Always connected” is the new mantra; it’s part of their journey, and that dictates the strategy. In order to keep up with this new “always-connected” customer, businesses must embrace technology to deliver an unmatched customer experience.

Fortunately, putting the customer first is already at the centre of many organisations’ strategy, but are Housing Associations ready for this? Do they really know their customer / tenant?

Informed observers may question why after abolishing the Tenant Services Authority it needs a Green Paper and a series of tower block fires to now re-promote the tenant cause.

Perhaps technology will succeed where the legislators and regulators failed?

Part 1

UNDERSTANDING THE NEW, DIGITAL CUSTOMER EXPERIENCE:THE STRATEGIC PERSPECTIVE

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Times are changing. According to research from IDC, two-thirds of the CEO’s of Global 2,000 companies will shift their focus from traditional, offline strategies to more modern digital strategies to improve the customer experience before the end of 2019 – with 34% of companies believing they’ll fully adopt digital transformation within 12 months or less.

However, despite this forecast, we’re far from widespread digital adoption. Many have not started down this road and significant numbers fear that they are behind the curve. And there’s good reason to worry: The same study found that 55% of businesses believe they have less than a year before they start to suffer financially and lose market share.

As digital becomes the accepted norm, the pace of change will accelerate as Housing Associations cannot be insulated from powerful consumer behavioural change. The complacent attitude, albeit of being a monopoly supplier of service, in constant demand, funded by the state simply won’t stand in the future in the court of consumer preference, regulatory change, legislation and potential fiscal intervention a recent example of which was the 1% rent reduction regime.

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Digital transformation is the integration of digital technology into all areas of a business, resulting in fundamental changes in how a business operates and the value they deliver to their customers.

Put simply, it’s about changing the way a business interacts with its customers and how they provide their customers with a consistent experience whenever and wherever they need it. In fact, when asked about factors that influence a business’ decision to implement a digital transformation strategy, most cited customer experience and customer satisfaction as their leading influences. However, it goes wider than that, encompassing many processes, procedures and a fundamental switch in attitude.

Commercial organisations that do transform digitally are creating highly engaged customers ands improving satisfaction levels. The evidence suggests that And these customers are six times more likely to try a new product or service from their preferred brand. They are four times more likely to have referred your brand to their friends, family and connections and twice as likely to purchase with their preferred brand, even when a competitor has a better product or price.

A study at MIT found that companies that have embraced digital transformation are 26% more profitable than their peers. This is a significant potential huge revenue opportunity which you could be taking advantage of by digitally transforming the business. It’s clear that the customer is firmly in the driver’s seat. But, in order to deliver on a better customer experience, one you first needs understand the nature of the new kind of digital customer.

Part 1

SO WHAT IS DIGITAL TRANSFORMATION?

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Digital technology has transformed consumer habits with mobile devices, apps, machine learning, artificial intelligence, automation and new technologies allow customers to get what they want almost exactly at the moment they need it. In addition, these new digital technologies have caused a shift in customer expectations, resulting in a new kind of modern interaction. Consumers are constantly connected, and increasingly aware of what can be done with technology.

Because of the opportunities that rise from using modern technology, customers often rate organizations on their digital customer experience first. Students regularly chose a university based upon their Wi-Fi coverage. Digital first requires organisations to first rethink customer interactions.

Instead of waiting for the customer to contact you, you will need to reach out to them, build a relationship and help educate them. You can do this by sharing relevant content and your expertise as part of a solution to their problem. Customers want (and expect) highly targeted messages, which can only be achieved through a data-driven strategies. Now, you need to use digital channels to implement search engine marketing, account-based marketing and email marketing strategies.

Customer service teams, heavily invested in Housing Associations in recent time , may no longer be restricted to waiting for the phone to ring or a fax to come through. Digital first is not just about being reactive. It’s about being proactive in the way you help your customers, who use a wide range of channels to seek out support. Social media, reviews sites, forums, and communities are all now part of the customer service eco-system in which process must inevitably play a major part. Associations need to be ahead of the game, simply because in the event of a communications void the tenant or groups of them have to power to muster a campaign or worse instigate the elements of a class action.

THE NEW, DIGITALLY CONSCIOUS CUSTOMER

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Digital transformation offers organisations an opportunity to understand the modern-day customer, engage with them and deliver on their expectations of a multi-channel customer experience.

So, why do some digital transformation efforts succeed while others fail?

To help you succeed, here are three potential ways to help your business to get started with digital transformation.

Part 1

GETTING STARTED WITH DIGITAL TRANSFORMATION

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1. An Agile, Flexible IT Environment

Having the right technology to power up digital strategies is fundamental in today’s business world. Recent surveys indicate that 45% of executives believe their companies lack all the necessary technology to conduct a digital transformation strategy.

Fortunately, organizations recognize the need for implementing agile systems and 86% of businesses believe that cloud technology is critical to digital transformation particularly when linked along with relational database capabilities. The cloud enables companies to be fast, dynamic and flexible – giving your organization the ability to test new projects that are cost-effective and low-risk – allowing you to use technology to meet customer demands quicker.

By easily connecting current Software as a Service (SaaS) applications such as customer databases, Big Data analytics, web and mobile apps, you can digitally record all touch-points to create a 360-degree view of your customer. By using this data, you will learn how, when and why your customers do business with you and from it, you can provide a better, more improved customer experience. In addition, the ability to connect data sets via relational database applications encompassing relating to the property assets, organisational resources and external data sources allowing s simulations, planning and evaluations to be conducted which hitherto have been beyond the competence and capability of many traditional based IT systems rooted in silo architecture.

This brings us to the next factor in digital transformation – personalisation.

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2. Personalised Customer Experiences

In recent years there have been a number of efforts within the Sector to promote an improved settlement for the tenant. Tenant engagement was the bye word in recent times. But how well do Housing Associations know their tenants? How far has the relationship moved from the historical tenant / landlord relationship to a more mature customer /service provider? Today’s customers in the wider world want organisations to treat them as a unique individual, and know their personal preferences and interaction history.

According to Accenture, 75% of customers admit being more likely to buy, or form a strong personal relationship based upon mutual respect with a company that:

• Recognizes them by their name,

• Knows their relevant history, and

• Recommends products or actions based on their past behaviour

The best part is that they’re happy for organizations to use their data. The really good news is that customers are happy for organizations to use their data to improve their experience.

But, in order to take advantage of this opportunity, organisations need to invest in tenant related management systems since in their absence the tenant cannot be treated as and individual. And without storing the history of how your business interacts with them, it’s impossible to provide a unique experience.

It is well know that CRM systems, have the ability to analyse and study customer-related data based on a customers’ previous interactions with an organisation. For example, deeper understanding of customers by evaluating general requests, product quotes and support enquiries are the norm in market focussed businesses. This data can then be used to create highly targeted messages to match customers’ individual preferences, which results in a more personalized experience. Imagine the power, when this data is related to specific property data delivering the right message to the right person at the right time.

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3. A seamless multi-channel experience

Technology has empowered customers to get what they want, whenever they want, and how they want it. The norm is moving towards consumers now expecting a customer service response within one hour. This norm is also expected on weekends as on weekdays.

This need for instant gratification has forced organisations to remain accessible and on demand, 24 hours a day, 7 days per week.

Everything is now happening in real time, which is why those companies that can offer immediacy, personalization and accessibility to their customers will win out in the long run.

Today’s consumers are not tied to a single channel. They browse in-store, shop online, share feedback , conduct political quests through mobile apps and ask questions of support team on social media networks.

Tying all of these interactions together allows you to create a single digital profile every time a customer interacts with your business.

This brings us to our third and final success factor for digital transformation – a seamless multi-channel experience.

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In a recent publication legal specialists Devonshires highlighted a series of risk areas facing Housing Associations in the next five years as they continue to face many hurdles. As such the quest for information and data upon which to manage, plan and coordinate strategies will undoubtedly increase along with the need for a much stronger analytical capability.

As well as political and economic uncertainty, there are commercial and regulatory risks which could have an impact on how RPs operate and their future success. Here we re-outline their 10 biggest challenges and how RPs can mitigate them based around the strategic issue of using data as an asset.

Part 1

FUTURE STRATEGIC CHALLENGES FOR REGISTERED PROVIDERS

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1. Rent Controls

Following Jeremy Corbyn’s big announcement at the Labour Conference last year, rent controls could be a fallout from a change of government. Although we don’t know yet what form of rent controls he has in mind, landlords may face a regime not seen in decades. While rent control may not affect their core stock, Private Rented Stock models may be shattered and need reworking.

RP’s need to be prepared to switch tenures and meet changing demands – ranging from social to full market rent. Viability models will also need to allow for more risk. The ability to argue from a position of strength based upon viable information and data will be crucial, both in the political argument, and assessing the relative impact and assuring the regulator in terms of

2. Changing Community and Local Rights

If other local authorities follow the stance taken by the Mayor of London, including introducing leasehold ballots for schemes involving demolition, then significant regeneration schemes will be far more difficult for RPs to implement. As the social housing stock condition nears the end of its useful life, the management of tenant expectations based upon quantative data will be key.

When appraising regeneration projects, RPs will need to take into account the risk of failing to achieve resident buy-in. RP boards should also consider incorporating the cost of replacing homes with units of the same standard and size as those currently occupied by residents entitled to vote.

RPs may need to review how they consult with residents and work more closely with local communities so that they are more involved in the planning process. The ability to link tenant information, to population statistics, market shifts, property cycles and commercial considerations will be critical as differential demands become apparent eg; the disparity between the growth demands posed by an aging population, the lack of appropriate housing stock for their needs and the potential impact upon their future health outcomes. As the general shift towards combining health and social care proceeds, the place of housing in a new triumvirate will be the future focus.

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3. Labour Constraints

The lack of labour in the construction industry will, inevitably, lead to a constriction in the supply of new homes – a key deliverable for the sector. This could affect RPs in a number of ways, including reduced values from more cautious valuers concerned about delivery. Even then poor quality issues abound, and the management of restoration programmes is key.

How many RPs have a full up to datea and accessible records of all the warranties and guarantees relating to new and regenerated stock in order to make appropriate calls on any insurance policies or do failures just get dealt with as routine repairs?

RPs must ensure tight delivery obligations in building agreements, perhaps with an incentive for delivery on time. However, legal agreements alone are not a complete fix, so RPs will have to assume the risk of delay in business plans for example how many RPs have viable information on snagging delays and relate them to the lost opportunity cost of rentals forgone. Additionally, they must consider whether off-site construction is an option, and an option via a vertical integration programme to help regenerate areas by bringing much needed manufacturing capabilities to deprived areas.

4. Changing Attitudes Towards S106 Agreements

The Mayor of London’s “take it or leave it” attitude towards S106 agreements means that RPs face the risk of poorly drafted provisions. These could include shoddy mortgagee exclusion provisions which may only allow charging at EUV-SH (“existing use value social housing” which would produce a lower property value than, say, a valuation based on “market value subject to tenancy”) or other terms which may inhibit a lender’s ability to take a charge over a property.

Are RPs on top of the issues, do they have the management information to ensure that they do not leave security reviews of S106 agreements to the last minute. Do they allow lawyers time to review, negotiate and fix S106 agreements with the Mayor. RPs should also use their sector collaborative clout to debate with politicians and planners to work out how to benefit everyone’s interests But it must be based upon viable quantitative information.

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5. The Leasehold Market Abuse Regime and Potential Asset Sales.

If there is a clamp down on the sale of leasehold houses (as opposed to flats), then RPs’ revenue from the sale of these houses may be reduced, even though shared ownership units may not be affected.

RPs should look at the impact of removing the capital receipt assumption in their business plans. Alternatively, consider selling freeholds of houses with a rent charge to cover service charges as opposed to selling leasehold houses. This requires sophisticated modelling and analytics to work up a series of scenarios for the purposes of planning and strategic choice.

RPs involved in more complex arrangements, perhaps through joint ventures, should check whether they are required to refund buyers. If so, they must allow for this liability before reconciling payments due to JV partners and ending JV arrangements. Whilst it is quite likely that the underlying information exists, the question remains whether it is available to evaluate the risk and potential liability without embarking on a costly archaeological dig to reach an answer.

6. Pension Deficits

Overall, pension scheme deficits are increasing rather than decreasing, despite the significant amounts that are being paid in by way of contributions. Pension deficits have been on the Sector Risk Profile for several years now and the solutions to dealing with the issue are starting to get bolder. Careful analysis of the work force, age and length of service requires detailed actuarial consideration.

RPs should be looking at whether it is appropriate to continue to provide generous final salary pension benefits, but need to be aware of the significant financial liability that could arise as a result of a decision to close down, or not support existing schemes. There are options to manage this, from bulk transfers of liability into new schemes to legal agreements that keep a liability floating whilst ongoing contributions are still made.

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7. Third Party Risk

Post Carillion, there may be a greater insistence for RPs to share risk in joint ventures. Conversely, the RP may face a greater risk of its own counterparty or JV partner becoming insolvent.

RPs must look more closely at the financial strength of counter parties, particularly those with off shore holding structures. As a result, boards may insist that the senior management team only accept tenders from counterparties with high credit scores. With a smaller “pond” of tenderers “to fish in”, RP’s may find that tender prices rise.

Alternatively, establishing a panel of local trades people, on call using an Uber style booking arrangement for maintenance programmes becomes a real possibility given the correct technology and process requirements. . I, iImagine rather than an unwieldy central contract, a small job to replace for example a tap washer is put out to a locally sources panel of trademen, previously vetted, who will do the job that day. Much of this can be managed using technology which in many organisations has revolutionised procurement.

8. The Grenfell Effect

New or revised Building Regulations may increase the cost of development and currently RPs face uncertainty as to precisely what standards must be achieved.

Prior to any revisions and subject to further guidance issued by the Ministry of Housing, Communities and Local Government, RPs will be select cladding systems which have been tested to BR135. But have they also ensured, that for each property, that all board decisions and professional advice relating to the selection of the cladding system are carefully recorded. Leaving a fully auditable trail is now the way of the future. But it doesn’t end there.

One aspect likely to be sharply exposed as the enquiry unfolds will be details regarding who was actually living in the properties and under what arrangements – often a complete unknown to the shared -owner or the landlord. The whole issue of sub-letting will be exposed. No doubt, somewhere housing officer visit notes may have recorded letter addressees not in the name of the tenant, but was this picked up and by whom. Did it matter , as long as the rent was paid. Its only when extreme events intervene that the underlying story is revealed. The requirement for all this to be tightened will undoubtedly fall to the landlord, requiring the keeping and access to records.

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9. The New Regulatory Framework

Although RPs were relieved when deregulation removed multiple statutory hurdles, the blank regulatory pages may be refilled with new rules emanating from the regulator for social housing’s review of the Regulatory Framework. These will inevitably increase costs for RPs.

If the Government gives responsibility for stock condition (especially H&S) to the regulator for social housing, they could introduce new regulatory standards which if breached could impact loan covenant compliance. These would however, be subject to consultation. RPs should, therefore, be ready to lobby as soon as they get wind of the new regime. Again arguing from a position of strength with quantitative information will be key.

However, the general direction of travel cannot be ignored. There is now clear evidence that, particularly in older people and the very young, health outcomes and life expectancy are both heavily influenced by housing standards. With housing being referred to as the ‘First Social Service’ and the steady bringing together of Health and Social services, a creative and reforming Government will either place more requirements upon the housing sector or seek some form of practical involvement bring together all three services to improve social outcomes. The data implications would be enormous.

10. Confusing Roles

Should RP’s continue to be owners and operators or simply operators?

Many publicly traded property owners have “monetised” their property assets by selling them (often as a result of the efforts of activist shareholders) and become managers. Should RP’s also follow this precedent and use the money generated by the disposals to plough into this business, while avoiding the risks associated with owning property?

This may be a completely new model for the future however the quid pro quo will inevitably be a raising of standards for the tenant and how they are treated as a customer.

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Whilst the above sets out some of the potential hurdles and risks facing RPs, the near and present challenges of value for money and tenant engagement, along with improving process efficiencies are both current and ongoing. In themselves they are generating much stronger and wider demand for verifiable data and information as the results are open to scrutiny as part of annual reporting and will certainly be centre stage for the Regulator in assessing governance and viability standards. .

The growth of bodies such as Customer and Community Networks representing the voice of the customer are now commonplace as they perform valuable roles in scrutinising performance and shaping service delivery. Sitting at the heart of local service offerings the quest for more accessible and accurate data in response to customer demand and the impact of welfare reforms has never been greater.

In addition we have also seen the development of a raft of cost per unit (CPU) comparisons driving process and delivery changes under Value for Money (VFM) reporting. . The meaningful interpretation of such data and information is key when assessing CPUs for Management, service charges, maintenance, major repairs and other costs in the context of planned regimes, strategic choice and financial planning.

Data is the lifeblood of a well organised and efficiently managed operation. In the context of income generation the once stable, government funded, predictable flow of revenue is now under risk. Customer affordability frameworks, Government rent reductions, performance of bad and doubtful debts, arrears management are all relatively newish concepts in this sector demanding data efficient processes to ensure proper management. Along with shared ownership sales and NPV on disposal properties, both strategic plays, the analytics underpinning any decision are critical in the context of value creation.

Part 1

INTERNAL PROCESS RECONFIGURATION

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Lastly, most organisations are in essence awash with information, but are unlikely to be fully on top of, or have access to data to facilitate proper management or planning. For organisations that are holding significant assets on their balance sheets along with a raft of extensive and possibly poorly assessed liabilities the type of information held is likely to encompass the following range:

• Property documents – certificates of title/searches etc

• Financial documents

• Asset lease documents

• Operating lease documents

• Supplier contracts

• Product warranties

• Maintenance schedules

• Property Covenants

• Loan agreements

• Nominations agreements

• Section 106 agreements

• Leasehold arrangements

The above are all relevant to and important in the management of a property estate. Various individual need to be able access individual data sets, or aggregated derived data. E.g. the Finance Director needs to know for IFRS 16 the various lease liabilities for both on and off balance sheet purposes. These are all likely to be held in paper form.

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The above are all relevant to and important in the management of a property estate. Various individual need to be able access individual data sets, or aggregated derived data. E.g. the Finance Director needs to know for IFRS 16 the various lease liabilities for both on and off balance sheet purposes. These are all likely to be held in paper form.

So as part of the digital revolution, enter stage left Artificial Intelligence (AI). Technology already exits and can be trained to extract relevant information automatically from complex documents and contracts. The data can be brought to light in a structured format allowing for better and much more efficient data aggregation and better transparency over large data sets.

In pursuit of optimising data management the combination of AI along with relational databases could be a powerful tool allowing for:

• Fast data aggregation

• Ease of extraction of paper based information

• Higher quality control

• Real time insight in to a portfolio of data

• Migration and synchronisation of data sets with core information.

• More informed data analytics.

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The above examples are some thoughts on the range and scope of the challenge. In today’s fast-moving, always connected and always on society, Housing Associations will be forced to seriously consider implementing a wide ranging digital transformation strategy, if they haven’t already started down this road.

Digital transformation offers organisations an opportunity to engage modern buyers, and deliver on their expectations of a seamless customer experience regardless of channel or place.

That being said, digitally transforming any business is inevitably a complex project requiring focus, leadership and the selective use of specialist resource , who both understand the challenge and the practical effects of change and its efficient management.

So, here’s how to get started:

Part 1

CONCLUSION

1. Instead of purchasing on-site solutions, think cloud solutions first.

Cloud Solutions enable you to be agile and meet customer demands quickly. In addition, you’re automatically updated to the latest features, so you are never behind. It creates one version of the truth, a central repository and an invaluable management tool. There is little need to abandon legacy systems, just gradually migrate the data and information to the central source.

Coupling the data /information repository with the latest relational database technology, process applications, analytics and presentational tools baoth enhances decision making leading to improved performance and reporting

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2. Personalized experiences are what your customers have come to expect.

Use the data in your customer facing software to evaluate previous correspondence, interaction and transaction history and their behaviour to give them just that. In addition supplement your Cloud solutions with a first rate front end for both customers and staff usage. This means a range of web based simple to use applications which employees and tenants find easy to use.

It also implies that a potential knowledge and competency gap will need to be bridged as organisations bring on stream new approaches and applications. Developing these applications, already widely used in retail, commerce and other customer facing organisations will be the new direction of travel necessitating Associations to form partnerships, ventures and become focussed on learning form others.

3. Customers and staff want seamless experiences regardless of channel.

Consider how you tie all the digital channels you have in the organisation together in order to provide a single, user-friendly customer experience.At the core will be the wider implementation of relational database technologies and associated analytics to bring existing data and information sources together to improve productivity, performance and personalised experiences.

As Housing Associations develop their ethos form managing tenancies and housebuilding to building communities , the digital revelution will enhance and accelerate that transition.

By focusing on these three factors, you will help your organization embrace the new digital landscape, exceed customer expectations and improve the overall customer experience.

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About the Author

Chris Lyons, currently Chairman of Ashley House plc, past Chairman of London Strategic Housing and Deputy Chairman and Chairman of the Audit and Risk Committee of Network Housing Group, and a strategic advisor to Westbrook International.

Chris has a portfolio career specialising in strategic planning, corporate governance and non-executive appointments. He studied at London Business School and hold a Masters in Strategic Financial Management. He is a published author.

As an accomplished strategist with over 30 years’ experience in Housing, Chris is well qualified to explore the strategic challenges faced by the sector, and has been inputting into a range of solutions to help organisations engage with new technologies that improve services to tenants and management stewardship.

About Westbrook International Ltd.

Westbrook is a Consulting Partner to Salesforce.com, the Customer Success Platform and world’s #1 CRM company. Westbrook has more than 12 years of experience delivering projects to over 400 clients.

For information visit westbrook.co.uk or contact Ambrose McGinn CEO on +44 7901 005100 or [email protected]

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Bibliography

The Digital Transformation Outsystems 2018

Why IT struggles with Digital Transformation . Outsytems 2018

The impact of emerging technologies on construction Industries , Calie Pistorious , DeltaHydron August 2017

The productivity dilemma facing UK Housing Associations . Script & Go March 2018

Sector Risk Profile 2018 . The Regulator of Social Housing.

The Housing Association of 2020 PWC

The shift towards Mobile technology T-Pro 2018

The Challenges for Registered Providers Devonshires 2018

© C.P.Lyons August 2019.

The opinions, advice and guidance expreessed in this paper are intended as a guide only. Every effort has been made to ensure the accuracy of the material , contents and associated material. The publishers, contributors and author accept no liability for any loss or injury sustained as a result of using the inofrmation in this paper.

All rights reserved. No part of this publication may be reproduced , stored in a retrieval system, or transmitted in any form or by any means, electronic , mechanical, photocopying, recording or otherwise without the prior permission of the author.

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2020 VISION & BEYOND - Westbrook International

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